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2018 (9) TMI 617 - AT - Income TaxDeduction u/s 10A computation - deducting the foreign currency amounting to 114, 299, 979/- from the Export turnover for the purpose of computing deduction u/s 10A - Held that - As decided in assessee s own case 2014 (11) TMI 1159 - ITAT MUMBAI the facts pertaining to the assessee s business of software development the charges and which are claimed to have incurred are in relation to the business of software development within India. They couldnot be said to be costs deductible from export turnover for the purposes of Section 10A of the Act. In such circumstances we are of the opinion that any wider controversy or larger question does not require any answer. We can leave that aspect open for the decision in an appropriate case. In relation to the business of the assessee before us it is not necessary to go into the other contentions raised before us by the revenue Deduction of Insurance expenses from the Export turnover for the purpose of computing deduction u/s 10A - Held that - This issue has already been adjudicated by Hon ble Bombay high court in the assessee s own case for the A.Y. 2006-07 2014 (4) TMI 1224 - BOMBAY HIGH COURT the facts pertaining to the assessee s business of software development the charges and which are claimed to have incurred are in relation to the business of software development within India. They could not be said to be costs deductible from export turnover for the purposes of Section IDA of the Act in such circumstances we are of the opinion that any wider controversy or larger question does not require any answer. We can leave that aspect open/for the decision in an appropriate case. In the facts and circumstances of the present case and in relation to the business of assessee before us it is not necessary to go into the other Contentions raised before us by the revenue. Deduction of tele-communication and satellite link charges from Export turnover for the purpose of computing deduction u/s 10A - Held that - As decided in assessee s own case 2011 (5) TMI 509 - ITAT MUMBAI since we have held that these expenses have been incurred in the business of software development in India these could not be considered as expenditure attributable to delivery of computer software outside India. We therefore set aside the order of AO on this point and hold that these expenses are not to be excluded from the export turnover. Disallowance with respect to the write off of advances provided to employees in the course of business - as argued by assessee that the advances were given to employee (who left the organization) and the advances were not recovered therefore the same is revenue in nature and hence the expenses are liable to be allowed u/s 37(1) - Held that - The expenses were incurred during the course of business which could not be bifurcated on account of any one and other reasonable if this expenses have been incurred during the course of business therefore no doubt the same is revenue in nature hence the same is allowable hence we allowed accordingly.
Issues Involved:
1. Adjustment to the arm's length price under Section 92C of the I.T. Act, 1961. 2. Reworking of deduction under Section 10A. 3. Deduction of foreign currency expenses from the export turnover. 4. Deduction of insurance expenses from the export turnover. 5. Deduction of telecommunication and satellite link charges from the export turnover. 6. Exclusion of expenses from total turnover if excluded from export turnover. 7. Disallowance of write-off advances provided to employees. 8. Levy of interest under Sections 234B and 234C of the Act. 9. Initiation of penalty proceedings under Section 271(1)(c) of the Act. Issue-wise Detailed Analysis: ISSUE NO. 13: The issue regarding the adjustment to the arm's length price was deemed consequential in nature due to the prior adjudication of issues 1 to 12 in ITA No. 7861/M/2011. The tribunal found no need to re-adjudicate this issue as it had already been addressed. ISSUE NO. 14: The assessee challenged the reworking of the deduction under Section 10A, from ?357,437,940 to ?348,578,085. This issue was interconnected with issues 15, 16, and 17, wherein specific amounts were discussed. The tribunal referred to its previous decisions in the assessee's own cases for A.Y. 2008-09 and A.Y. 2009-10, where similar adjustments were decided in favor of the assessee. The tribunal upheld the assessee's claim, directing the AO to delete the disallowance and compute the exemption as per the law. ISSUE NO. 15: The tribunal addressed the deduction of foreign currency expenses amounting to ?114,299,979 from the export turnover for computing the deduction under Section 10A. The tribunal referred to its previous decisions and the Bombay High Court's ruling, which supported the assessee's claim that such expenses should not be excluded from the export turnover. The tribunal decided in favor of the assessee, directing the AO to compute the exemption accordingly. ISSUE NO. 16: The assessee challenged the deduction of insurance expenses amounting to ?3,452,624 from the export turnover for computing the deduction under Section 10A. The tribunal referred to the Bombay High Court's decision in the assessee's own case for A.Y. 2006-07, which ruled in favor of the assessee. Consequently, the tribunal upheld the assessee's claim and directed the AO to recompute the exemption. ISSUE NO. 17: The assessee contested the deduction of telecommunication and satellite link charges amounting to ?25,372,166 from the export turnover for computing the deduction under Section 10A. The tribunal referred to its own decisions in the assessee's cases for A.Y. 2006-07, A.Y. 2008-09, and A.Y. 2009-10, which consistently ruled in favor of the assessee. The tribunal upheld the assessee's claim and directed the AO to recompute the exemption. ISSUE NO. 18: This issue was raised as an alternate ground by the assessee. Since issues 14 to 17 were adjudicated in favor of the assessee, this issue was deemed academic and did not require a separate decision. ISSUE NO. 19: The assessee challenged the disallowance of ?2,720,457 related to the write-off of advances provided to employees. The tribunal accepted the assessee's argument that these advances were given in the course of business and were not recoverable, thus qualifying as revenue expenses under Section 37(1) of the Act. The tribunal allowed the claim, treating the expenses as revenue in nature. ISSUE NOS. 20 & 21: These issues related to the levy of interest under Sections 234B and 234C and the initiation of penalty proceedings under Section 271(1)(c) of the Act. The tribunal found these issues to be consequential and did not require separate adjudication. They were decided in favor of the assessee. Conclusion: The tribunal's order dated 07.09.2018, adjudicated the issues in favor of the assessee, directing the AO to recompute the exemptions and allowances as per the law and previous rulings. The appeal filed by the assessee was allowed.
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